Tesla, GameStop, and the power of ‘meme stocks’

January 27, 2021, 9:17 PM UTC

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“Who controls the memes, controls the Universe” — Elon Musk (June 26, 2020)

Eons ago, when I was interviewing for a job at another financial publication, I could tell the precise moment everything went off the rails. All was going well—until my last interview when a wizened editor showed up and asked me a question I knew would be the make-or-breaker: “What do you think about Tesla?”

The hard-nosed type before me wanted to hear, plainly, that I did not buy Tesla’s hocus-pocus. The electric carmaker was burning through cash like a West Coast wildfire. Tesla was hugely unprofitable, saddled with mountains of debt, and consistently missing expectations. The entire automotive industry had it out for the company, competition was intensifying from the likes of tech giants, like Apple, Google, and others, and just about every short seller was betting on its demise. Oh, and the company had a loose cannon liability in the driver’s seat in Elon Musk. Tesla’s market valuation was obviously out of whack with reality.

I said all this. And then I did myself in.

Even knowing all that, I said, apparently prizing candor above employment, I wouldn’t bet against Tesla. Musk built a cult-like fan base that will follow him into the infernos of hell or the vacuum of space or wherever else he wants to go and back again. If you’re “short” Tesla, then you’re underestimating Musk’s influence and failing to grasp the underlying dynamics of the marketplace.

I could see micro-stress lines forming in the corners of the editor’s eyes. I could sense his smile fading. My response was not what he hoped to hear. The answer didn’t gel with his decades-long experience as a shrewd observer of market shakeouts. He was clearly a student of value investing, the rational, Warren Buffett-approach to pricing stocks. Another foolish Musk fanboy, I’m sure he thought.

Tesla shares have surged well over 1,000% since I blew that opportunity. Similarly, Bitcoin has rebounded in a moon-ward blastoff. An army of Redditors have bid up new fad GameStop until it’s become the most traded stock in America, causing it to gusher more than 1,600% since the start of the year. A slew of other formerly down-and-out stocks are likewise hitting the jackpot, if temporarily, including AMC, Bed Bath & Beyond, and Roomba-maker iRobot.

All these companies—and, yes, Bitcoin too—have something in common. Their valuation successes—however short- or long-lived—are products of “meme” culture, the phenomenon of people convening, commiserating, and cracking jokes on social media. Stocks that can generate ample amounts of enthusiasm online, whether inspiring loyalty or just lulz, will, as a rule, be breakouts.

Bubbles aren’t anything new, to be sure. (See: Bulbs, Tulip.) But millions-strong message boards, like Reddit’s “wallstreetbets” forum, and phone-accessible brokerage apps featuring 24/7, no-fee trading, like Robinhood, are. Even if the highs we’re experiencing today are just a temporary bout of market insanity headed for a white-knuckled correction—which, yeah, is likely—I reckon something fundamental about the world, about the way the Internet’s speed and scale influences the analytical calculus of equities, has changed.

Investing is growing more democratized by the day, and the unwashed masses outside Wall Street are wielding more power as a result. “Becoming an investor is the new American dream, just like home ownership was before,” as Vlad Tenev, the chief executive of IPO-bound Robinhood, writes. In this new era, assets’ intangible factors—ones that can inspire religious devotion (like Tesla) or Dionysian, flash-mob-style decadence (GameStop)—gain sway. Memes matter.

The other day, I tweeted, half-jokingly, “If you don’t calculate a stock’s price-to-memes ratio then your fundamental analysis is lacking.” I stand by that now, just as I did during my failed job interview.

Robert Hackett





Janet Yellen confirmed as Treasury Secretary ... Biden Treasury renews 2016 commitment to put Harriet Tubman on the $20 bill ... FinCEN extends comment period for reviled Trump cryptocurrency proposal ... Biden executive order pauses federal student loan payments ... Digital finance assistant Albert raises $100m ... WallStreetBets isn't interested in Bitcoin ... Social Capital CEO Chamath Palihapitiya is running for Governor of California.



New Hampshire and Massachusetts go to war over work-from-home income taxes ... After GameStop, barbarians pump AMC stock ... PayPal boots alleged Capitol rioter Jenna Ryan ... Chime makes 21% of its revenue from ATM fees ... TikTok astrologist offers Bitcoin investing tips ... Ethereum's 2021 Devcon conference postponed ... Class action suit targets Ripple for investment fraud ... Self-made Satoshi Craig Wright sends copyright claims on Bitcoin whitepaper.


Coinbase chief legal officer Paul Grewal joined Robert Hackett and Jen Wieczner this week to discuss the regulatory outlook for crypto under the new Biden administration. Grewal describes his mood as 'cautiously optimistic.' He also takes the unconventional position that recent legal action against Ripple is actually a bullish sign for the industry: "Government and others only take an interest in an industry once it’s arrived and become meaningful."



The Tuesday rally in BB Liquidating Inc. (BLIBQ), the empty husk of what used to be Blockbuster Video. Blockbuster, of course, declared bankruptcy over a decade ago, and according to Bloomberg there is only one Blockbuster store still in operation. The pump was engineered by denizens of r/WallStreetBets and other "social investing" communities.

On Wednesday morning, the stock dropped by more than 50%—a reminder that a coordinated pump is pretty much inevitably followed by a chaotic dump.


“As a technology it is very cool, but you can’t just sit there and be a Pollyanna and think that all information will be free ... There will be racists, and people will shoot each other. It’s going to be the total package.”

Elon University computer science professor Megan Squires, on the rise of decentralized web services in a new report from the New York Times. Inspired by the uncensorable infrastructure behind Bitcoin, efforts to create blockchain-backed versions of Twitter or YouTube gained new relevance after a wave of bans triggered by rioting at the U.S. Capital on January 6. While many supported those bans, including the permanent suspension of Donald Trump from Twitter, they raise serious questions about the immense power of centralized social media platforms. For projects like YouTube alternative LBRY, a blockchain-based protocol can help route traffic to content without relying on a central server, removing the ability to censor content, and possibly the related legal and moral quandaries.

Notably, LBRY draws as much tech from BitTorrent as blockchain, connecting to a much longer legacy of innovative decentralization. And though not touched on in the Times piece, Twitter alternative Mastodon uses a particularly interesting 'federated' model not based on blockchain.


Should you add Bitcoin to your portfolio in 2021? - Robert Hackett

How Bitcoin tanked on a false 'double spend' rumor - Jeff John Roberts

An exclusive first look at Goldman's new Marcus Invest - Rey Mashayekhi

Digital payroll startup Check raises $38m, led by Stripe - David Z. Morris

GameStop 'YOLO' rally blasts on, leaving short sellers squeezed - Jeff John Roberts

Citigroup closes its gender pay gap, ever so slightly - Emma Hinchcliffe and Claire Zillman

China's central bank punishes 16 organizations for refusing to accept cash - Grady McGregor

Inside Leon Black's resignation from Apollo Global ManagementLucinda Shen

Revolut disrupted banking in Europe. Can it do the same in the U.S.? - Jeff John Roberts



This edition of The Ledger was curated by David Z. Morris. Contact him at david.morris@fortune.com

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